June 29, 2023
Co-Founder of Stackin
Sam Garrison is the president and co-founder of Stackin, a financial wellness company. Before Stackin, Sam built and launched new ventures at BCG Digital Ventures, the venture and incubation arm of the Boston Consulting Group.
You don’t actually need that much money to start investing in stocks. There are a number of apps that will let you open accounts for free and invest however much cash you want (even if it’s a very small amount).
However, investing small amounts of money means you’ll only earn small profits. If your end goal is to turn investing into a major side hustle and bring in significant cash flow, you’ll need to invest a lot more money.
Yes, you can trade stocks with $100. There was once a time when opening a stock-trading account meant investing thousands of dollars with a brokerage (a company that facilitates trades), but these days, you can start with much less money.
There are dozens of brokerages that you can open an account with completely for free. Two of the biggest names in this space are Charles Schwab and E*TRADE, although you might also have heard of Robinhood (which, while it’s sometimes been caught up in controversy, is a legitimate free brokerage).
The downside is that most of these brokerages won’t give you much extra help. You’ll have to do your own research and learn how to invest on your own. This actually isn’t as complicated as you might think, but it can be intimidating when you’re just starting out.
There are several investing apps, such as Acorns and Betterment, that give you the opportunity to invest and that will manage your money for you for a low fee.
In the finance world, apps like this are referred to as “robo-advisors,” meaning they’re platforms that provide automated investing advice.
Both of the apps listed above will let you open an account for much less than $100 (although they aren’t completely free).
You won’t make cover-of-Forbes money this way, but these apps are safe and easy avenues to learn Investing 101 without taking a big risk.
Experts typically advise you to invest 10-12% of your annual income in stocks. If you make $50,000 a year, you’ll want to set aside around $400–$500 per month to invest. That’s about $4,800–$6,000 a year.
Of course, when it comes to investing, you also should consider your comfort level—how much risk do you want to take on? What’s your ultimate goal?
If you’re just starting out, 10% might feel like way too much. If so, start at a lower percentage until you feel more confident about how things work.
In general, you profit from stocks by investing in companies that will grow in value.
When you invest in a stock, you’re putting money into the belief that this particular stock will go up in price. If one share of Company X is valued at $100 today, then by buying it, you’re betting that this stock will be worth more than $100 per share in the future.
The value of that share often depends on the success of the company. If Company X releases a hot new product, their stock price will jump. On the other hand, if Company X is involved in a scandal or loses money, their stock’s value will drop. Sounds a lot like high school, huh? That’s because it kind of is.
When it comes to stocks, street cred goes a long way. People who buy stocks are just trying to figure out which companies will be successful in the future.
The picture we’ve painted here is a bit simplistic. There are a few caveats you should bear in mind when you’re getting into investing. You don’t need to understand them perfectly in order to start making money, but you should be aware of them.
Stock prices aren’t always perfectly tied to how successful the company is. Sometimes a company can generate positive publicity despite performing poorly (or vice versa), and its stocks may behave accordingly.
However, most of the time, the stock prices of successful, innovative companies outperform their competitors (i.e., the average price of the market as a whole).
Making money by buying shares of individual companies can be tricky, even for professional investors who’ve dedicated their careers to doing exactly that.
Many small-time investors (known as “retail” investors) prefer to simplify things for themselves by buying shares of “funds” that contain many different stocks. For instance, you might buy a fund that tracks the performance of the entire market—every company that’s traded publicly on a stock exchange.
Because the stock market tends to go up over time (it’s historically averaged returns of about 10% per year), this strategy is usually a winning one.
That said, it’s not a good way to get rich quick. It’s a way to slowly increase your wealth over time.
People don’t always make money by buying shares of companies they think will do well. Some investors will actually bet that the shares of a particular company will drop in value, which is called “shorting” the stock.
This is an advanced (and risky) strategy, and not something that you should worry about when you’re just getting into investing or when you’re investing relatively small amounts of money (like $100).
Yes, it is possible to become a millionaire by investing in stocks, but only if you are investing large sums of money to begin with.
As mentioned, most investors shoot for returns of about 10% per year on the money they invest. So to earn one million dollars from your investments in a year, you’d need to put up at least ten million dollars at the start.
Also, you should be aware that 10% is just a long-term average. In any given year, it’s possible for any given stock (or the market as a whole) to overperform that, but it’s also possible for it to drop.
Investing always involves a certain amount of risk, at least in the short term. Never invest more money than you’d be prepared to lose.
